Column: Who Wouldn't Want a Tax Cut?
The bigger question: How would New Jersey pay for it?
In his State of the State message last week, Gov. Chris Christie proposed cutting income taxes 10 percent across the board for all New Jerseyans.
What great news! Who wouldn’t want a tax cut?
The average Morris County household, with a taxable income of $96,950, would eventually pay $402 less in taxes under Christie's proposal. The cut would amount to $118 in Passaic on $45,527 in income, and $210 in Sussex on $64,197.
Those are the figures for the eventual annual savings after three years, when the full cut takes effect. The typical household, then, could expect about a $134 windfall (a cup of coffee at Dunkin' Donuts or so a week) next year if the cut is approved, which is a big if at the moment.
The full 10-percent cut would buy about nine tanks of gas at current prices, depending on the size of the car. Two weeks of groceries for a family of four with teenage boys. Or a new flat screen TV, though not a big one.
To Republicans, it's an economy booster: Give people more money and it'll trickle down.
“The governor does not buy into the ‘Robin Hood’ economics of some legislators, but he clearly understands that our economy will improve by cutting taxes responsibly.” said Assemblyman Gary Chiusano, R-Sussex and Morris, and a member of the Assembly’s budget committee. He noted Christie twice vetoed Democratic attempts at renewing the recently expired tax on millionaires.
To Democrats, the governor’s proposal is unfair.
A graduated income tax is widely viewed as the most equitable because it is based on one's ability to pay. The Dems would rather see tax relief provided in a similar way.
But this cut would give a much smaller benefit, both in dollars and proportionally, to the lowest-income residents.
According to statistics from the Assembly Democratic office, a taxpayer with $30,000 in income would pay about $46 less in taxes under Christie’s proposal. Do the math and it works out to be .15 percent of income.
But someone with $250,000 would get .48 percent of income in savings, or $1,188, from a 10 percent tax cut.
According to the most recent Statistics of Income report by the state treasurer’s office, which includes data for 2009, more than a third of Morris County income tax returns had gross incomes of $30,000 or less, while 11 percent were totaled $200,000 or more.
“The governor’s math is seriously flawed,” declared Assemblyman Vincent Prieto, D-Hudson and the new chair of that house’s budget panel. “The governor continues on his crusade to further enrich millionaires, while ignoring his obligation to the residents who are in most need of our assistance.”
But millionaires won’t stand for higher taxes, the GOP contends.
The state treasurer’s office last fall released a report that found “small but significant” effects of different marginal tax rates on moving patterns.
Extrapolating, it estimated 20,000 taxpayers and $2.5 billion in annual income left New Jersey following tax rate increases in 2003 and the “millionaires’ tax” in 2004.
Of course, other studies have contradicted that, saying people move mostly due to jobs and the weather.
Democratic leaders have agreed to review Christie’s proposal and are particularly interested in learning where the money will come from to pay for the tax cuts.
That’s a very good question that the governor has yet to answer. He hasn’t even disclosed the cost.
His current budget anticipates $11.1 billion from the income tax. That mean a 10 percent tax cut would cost $1.1 billion. And shortly after Christie’s announcement, his treasurer’s latest revenue estimates put the state $325 million below what New Jersey had anticipated for the first six months of the year.
So those who think the tax cut is a good idea should explain how the state will pay for it.
Colleen O'Dea is a writer, editor, researcher, data analyst, web page designer and mapper with almost three decades in the news business.